Agenda item

Consider report by Isio. (Copy attached.)

9.1       With reference to paragraph 7 of the Minute of the meeting held on 22 September 2023 there had been circulated copies of a responsible investment metrics and targets report by Isio.  The Chairman welcomed Mr Andrew Singh, Mr Alex Ross and Mr Charles Pringle of Isio to the meeting.  Mr Singh confirmed that the metrics in the report had been selected with Task Force on Climate-Related Financial Disclosures (TCFD) regulations in mind.  Mr Singh confirmed that whilst TCFD regulations had not yet been imposed on the Fund, it was expected that the would be in the future.  The report documented each investment manager’s ability to report on the agreed metrics and the current portfolio position as at 30 June 2024 compared to the position as at 30 June 2022.  Mr Pringle, Isio’s in-house analysts for climate, provided a summary of the key terms related to responsible investment and confirmed that the Fund had agreed to adopt a target of relative improvement, as opposed to absolute or fixed targets.   An overview of the data was outlined with the majority of managers showing a reduction In absolute emissions and on a carbon footprint basis.  Mr Pringle highlighted that the UK-aligned managers tended to be biased towards higher emitting companies, and it was not beyond expectation that the numbers involved could continue to rise over time.  It was pointed out that LGT Crown Multi Alternatives coverage level had decreased, and Mr Pringle explained that was as a result of a change in asset class allocation and the treatment of insurance linked securities within the methodology approach.  There had been a shift in the approach to how those securities were considered, with the picture presented now more accurate as a result.  Overall coverage within the portfolio had improved, as there had been significant progress in the numbers being reported and the quality of the estimated data which had been provided.   The numbers of climate-related engagements had varied from the previous year, and Mr Pringle outlined that whilst some managers had increased the number of engagements, others had not sustained the same levels or had undertaken a lower number. 

9.2       The total greenhouse gas emissions of the portfolio was 54,463 metric tons, an increase of 39,755 metric tons from the 2022 analysis.  That was largely was a result of the increased coverage and data reporting across the portfolio.  Weighted average carbon footprint of the portfolio was 99.6 metric tonnes per £1m investment.  That had increased from the 2022 analysis of 29.8 metric tonnes per £1m.  Implied temperature rise figures provided by the managers ranged from alignment to a 1.5?C to 2.7?C temperature rise b the end of the century, compared to 1.8?C to 3.2?C in 2022.  The portfolio level figure calculated for 2023 was 2.1?C. The Implied Temperature Rise at portfolio level as at June 2023 reduced by 0.5?C, from 2.6?C which was reported in 2022.  There were 409 individual Climate-related Engagements with companies within the portfolio, where managers were able to report. That was an increase of 119 from the 2022 figure of 290 climate engagements.  In response to a question regarding increasing coverage in the bonds market, Mr Pringle explained that coverage levels were improving as more fund managers were able to report on the metrics.  It was not possible for some managers to report on sovereign elements, which had resulted in coverage being low.  Mr Singh outlined that coverage varied considerably between different asset classes, however it was anticipated that coverage would increase over time.  Members discussed whether or not it would be prudent to publish a Task Force for Climate Related Financial Disclosures compliance report, given that it was not required under the regulations.  The Director – Finance and Procurement, confirmed that whilst there would be a cost associated with the production of the report, based on Isio’s advice it was not expected to be unreasonably high.  Members agreed to instruct Isio to undertake the work to prepare and publish a TCFD compliance report.  

DECISION

AGREED:-

(a)     to note the report; and

(b)     to instruct Isio to use the information within the report to prepare and publish a Task Force on Climate-Related Financial Disclosures (TCFD) compliance report.